China Digital TV Announces Unaudited Second Quarter 2017 Results

BEIJING, Aug. 11, 2017 /PRNewswire/ -- China Digital TV Holding Co., Ltd. (OTC: STVVY) ("China Digital TV" or the "Company"), a leading provider of cloud platforms, with gaming and other applications embedded, to PRC digital television and telecommunication network operators, today announced its unaudited financial results for the second quarter ended June 30, 2017.

Mr. Jianhua Zhu, China Digital TV's chief executive officer commented, "We experienced solid progress in the second quarter of 2017 as both our registered and covered user counts maintained growth momentum, primarily driven by our ability to effectively leverage our expanded geographic footprint. We were also pleased with our business development efforts in content diversification and product innovation during the quarter. To ensure steady future growth, we will continue to strategically focus on user base expansion, further content diversification, and brand recognition in order to enhance the paid user conversion rate. Furthermore, we will continue to evaluate opportunities for innovative business expansion and potential asset acquisitions. We remain committed to driving further growth of our business and creating value for our shareholders going forward."

Mr. Zhenwen Liang, China Digital TV's chief financial officer, stated, "In the second quarter of 2017, the number of covered users on our cloud platform increased to 160 million. The growth was primarily attributable to the partnership we established with Taiyuan Radio and Television, enabling our expansion into the Shanxi province. We continue to evolve our strategic focus and positioning to maximize the performance of our operations and are confident we will further solidify our position as China's leading provider of cloud platforms."

Update on NYSE Continued Listing Status

As previously disclosed, China Digital TV received notification on July 10, 2017 from New York Stock Exchange ("NYSE") that the average trading price of its common stock had fallen below the NYSE's continued listing standard. The Company has responded to the NYSE to confirm its intent to regain compliance within the required period. The Company will actively monitor its stock price and evaluate all available options to resolve the deficiency and other listing standards that the Company may be in risk of non-compliance.

Also announced previously, the Company has appealed the NYSE's commencement of its delisting proceedings, which focus on its compliance with other listing standards related to lack of operating assets. The Company remains subject to all NYSE listing standards while that appeal is pending. The NYSE is currently scheduled to hold an appeal hearing in October 2017. The NYSE notification does not affect the Company's business operations or its SEC reporting requirements. The Company's stock has been trading on the OTC market under the ticker symbol "STVVY" since the NYSE suspended trading in May 2017.

SecondQuarter 2017 Results[1]

China Digital TV's net revenues increased by 34.5% to US$1.3 million from US$0.9 million in the prior year period. The increase in net revenues was primarily due to the increased product revenues during the quarter.

Cost of revenues increased by 125.0% to US$0.7 million from US$0.3 million in the prior year period. The increase in cost of revenues was primarily due to the increase of net revenues in the second quarter of 2017.

Gross profit in the second quarter of 2017 was US$0.6 million, which was slightly lower than the prior year period. Gross margin, which is equal to gross profit divided by net revenues, was 47.9% in the second quarter of 2017, as compared with 68.9% in the prior year period. The decline in gross margin was mainly due to an increased proportion of revenues from products during the quarter, which have a relative lower gross margin than services.

Operating expenses in the second quarter of 2017 decreased by 13.3% to US$2.3 million from US$2.6 million in the prior year period.

Research and development expenses in the second quarter of 2017 decreased by 13.3% to US$1.0 million from US$1.2 million in the prior year period. The decline was mainly due to a decrease in personnel related expenses, which was partially offset by an increase in share-based compensation.

Selling and marketing expenses in the second quarter of 2017 was US$0.5 million, which remained stable as compared to the prior year period.

General and administrative expenses in the second quarter of 2017 decreased by 17.5% to US$0.7 million from US$0.9 million in the prior year period. The decline was mainly due to a decrease in personnel related expenses, as well as decreased rental expenses.

Loss fromcontinuing operations in the second quarter of 2017 decreased by 15.5% to US$1.7 million from US$2.0 million in the prior year period.

Income tax expenses in the second quarter of 2017 was US$0.05 million, as compared with an income tax benefit of US$0.03 million in the prior year period.

Net lossattributable to China Digital TV Holding Co., Ltd in the second quarter of 2017 decreased to US$0.9 million from US$1.6 million in the prior year period. The decrease was primarily due to a combination of decreased operating expenses and increased interest income.

Non-GAAP net loss[2] attributable to China Digital TV Holding Co., Ltd in the second quarter of 2017 was US$0.7 million, as compared to net income of US$2.4 million in the prior year period[3].

Balance Sheet

As of June 30, 2017, China Digital TV had cash and cash equivalents and term deposits totaling US$27.6 million, as compared to US$125.5 million as of March 31, 2017. The decrease was primarily due to the payment of a special dividend of US$1.5 per ordinary share, representing a total cash dividend paid in June 2017 of US$100.3 million.

A replay of the call will be available for one week between 9:00 p.m. on August 10, 2017 and August 17, 2017, U.S. Eastern Time.

Replay Dial-in Information:

United States:

+1-877-344-7529

International:

+1-412-317-0088

Replay Access Code:

10111189

Additionally, a live and archived webcast of this call will be available on the Investor Relations section of China Digital TV's corporate website at http://ir.chinadtv.cn.

About China Digital TV

Founded in 2004, China Digital TV is a leading provider of cloud platforms, with gaming and other applications embedded, to PRC digital television and telecommunication network operators, enabling them to bring these applications to household television sets and other mobile devices.

For more information please visit the Investor Relations section of China Digital TV's website at http://ir.chinadtv.cn.

Safe Harbor Statement

This announcement contains forward-looking statements within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended. Such forward-looking statements are made under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "may," "should" and similar expressions. Such forward-looking statements include, without limitation, statements regarding the outlook and comments by management in this announcement about trends in the cloud computing, cable television and related industries in the PRC and China Digital TV's strategic and operational plans and future market positions. China Digital TV may also make forward-looking statements in its periodic reports filed with the Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about China Digital TV's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from projections contained or implied in any forward-looking statement, including but not limited to the following: competition in the cloud computing, cable television and related industries in the PRC and the impact of such competition on prices, our ability to implement our business strategies, changes in technology, the progress of the television digitalization in the PRC, the structure of the cable television industry or television viewer preferences, changes in PRC laws, regulations or policies with respect to the cloud computing, cable television and related industries, including the extent of non-PRC companies' participation in such industries, and changes in political, economic, legal and social conditions in the PRC, including the government's policies with respect to economic growth, foreign exchange and foreign investment.

Further information regarding these and other risks and uncertainties is included in our annual report on Form 20-F and other documents filed with the Securities and Exchange Commission. China Digital TV does not assume any obligation to update any forward-looking statements, which apply only as of the date of this press release.

Weighted average shares used in calculating earnings/(loss) per ordinary share:

Basic

61,216,730

60,183,853

Diluted

61,216,730

60,183,853

Reconciliation of Non-GAAP Measures

Non-GAAP net income attributable to China Digital TV Holding Co., Ltd. shareholders excludes share-based compensation expenses, and amortization of intangible assets acquired from business acquisitions. The Company believes that the Non-GAAP net income provides meaningful supplemental information regarding the Company's performance by excluding certain non-cash expenses that may not be indicative of its operating performance from a cash flow perspective. The Company believes that both management and investors benefit from referring to this additional information in assessing the Company's performance and when planning and forecasting future periods.

However, the use of non-GAAP financial measures has material limitations as an analytical tool. One of the limitations of using non-GAAP financial measures is that they do not include all items that impact the Company's net income for the period. In addition, because non-GAAP financial measures are not measured in the same manner by all companies, they may not be comparable to other similar titled measures used by other companies. In light of the foregoing limitations, you should not consider non-GAAP financial measure in isolation from or as an alternative to the financial measure prepared in accordance with U.S. GAAP.